Saturday, 1 June 2019

What is Tariff and types of Tariff ?

What is Tariff and types of Tariff ?

The rate at which electrical energy is supplied to a consumer is known as Tariff.

Although tariff should include the total cost of producing and supplying electrical energy plus the profit, yet it cannot be the same for all types of consumers.

It is because the cost of producing electrical energy depends to a considerable extent upon the magnitude of electrical energy consumed by the user and his load conditions.

Therefore, in all fairness, due consideration has to be given to different types of consumers (e.g., industrial, domestic and commercial ) while fixing the tariff. This makes the problem of suitable rate making highly complicated.

Objectives of tariff : Like other commodities, electrical is also sold at such a rate so that it not only returns the cost but also earns reasonable profit. Therefore, a tariff should include the following items :

01. Recovery of cost of producing electrical energy at the power station.

02. Recovery of cost on the capital investment in transmission and distribution systems.